Guatemala’s New Starts Imperative for Central America

Guatemala’s economic history has been defined by corruption, instability and broad social inequality. In that context, Rigoberta Menchu received the 1992 Nobel Peace Prize for her work in promoting indigenous rights in the country. There are now other unnoticed social changers: entrepreneurs who see hope in technology as a tool to overcome social divides, as one local entrepreneur told the New York Times.

The New York Times was there in 2011 to explore how reverse brain drain apparently began turning reality around for many young Guatemalans. Juan Mini, for example, returned to Guatemala in 2010 after starting a successful Internet company in California called ZipRealty. He returned to create what is now dubbed “Campus Tec.” Juan and other savvy minds set up workspaces and programming classes with an eco-friendly atmosphere in a seven-floor-building located in a central neighbourhood that had lost its lustre. A year later, this hub had become the entrepreneurial playground for 375 people, such as the founders of motion graphics startup BigoMo: Pedro Méndez, 28, had worked in Spain and Kristoffer Hormander, 25, had returned from college in Florida.

The biggest obstacle for these creative startups is financing. Guatemala needs to work on endemic challenges, such as drug-fueled violence, to achieve the minimum level of rule of law necessary to attract investors. According to the Index of Economic Freedom, Guatemala has lagged notably in promoting the effective rule of law with its judicial system vulnerable to political interference as well as poorly protected property rights.

In the meantime, entrepreneurs in Guatemala are turning to crowd-funding platforms. Juan Rodriguez and Manuel Antonio Aguilar, for example, recently launched a video on indiegogo.com to raise $50,000 to finish a solar panel prototype that works through pre-payment via mobile phones. Their pitch suggests that their Quetsol technology will bring electricity to rural areas and make a serious dent in the 520,000 homes throughout the country that lack access to electricity. But not all entrepreneurs there are using crowdfunding platforms to finance their startups. Huxi Games, which started the video game 42 Light Years, is using crowdfunding platforms for market testing. Their campaign is not focused on getting funds per se, but on validating the game idea and concept.

Still, the hurdles to starting a new firm are considerable. The cost of obtaining necessary licenses to launch a business remains about five times the level of average annual income. It seems the startup fever has not reached Guatemala as a nation which is clearly not yet taking steps to open the entrepreneurial path to more people.

In spite of these challenges, any opportunities seem to outweigh this challenge for many locals. The first Global Entrepreneurship Week / Guatemala has begun this work—starting with a critical mass of nascent entrepreneurs—but it does not yet enjoy the support of the government. Since so many of the hurdles for new and young firms can only be removed by the government, educating policymakers as to how they can help is now a major priority.

From a regional perspective, achieving critical mass and creating bottom-up pressure for a friendlier startup ecosystem is crucial. Guatemala is the most populous country in Central America, and it is the administrative hub for the Central American Integration System, which aims to improve economic cooperation in the region. Enabling entrepreneurship must be among its most successful achievements.